Big companies looking to hitch a ride on hot trends often break out the checkbook, like Microsoft’s acquisition of LinkedIn for $26.2 billion. But how an acquisition fits the brand is key, and companies don’t always pay attention here.
Microsoft’s announcement this month that it will buy LinkedIn has a lot of analysts and customers scratching their heads. What do the makers of Excel and Word want with a cloud-based connectivity technology mostly used by recruiters? Ideally, acquisitions are an effective way to gain share of mind and market, build brand reputation and stay ahead of hot trends.
Think of Disney's acquisition of Pixar in 2006—a perfect fit. Same with Facebook and Instagram, or the merger of J.P. Morgan and Chase to create a financial services company with both commercial investment and retail banking—a brand no-brainer. Other partners go together like Samson and Delilah; think Time Warner and AOL, or News Corp and MySpace. Microsoft has a patchy history with acquisitions: witness its write-downs from Nokia and Skype. Microsoft will need to carefully craft a story that makes its latest purchase fit the brand--or risk another write-down.
Why don't acquirers ensure brands complement each other and contribute to core value, rather than diluting it and entering uncertain brand territory?